The Delhi High Court recently granted relief to the arraigned director of a company accused of fraudulently availing Input Tax Credit ( ITC ), observing that the Respondent Goods and Services Tax (GST) Department had committed gross errors in following the procedural requirements to effectuate a valid arrest.
The Petitioner, Kshitij Ghildiyal is a Director of M/s Wee-Pro Resource Recovery Solutions Private Limited, a company engaged in e-waste management having and registered under the Central Goods and Services Tax (CGST) Act, 2017. The Petitioner’s company premises were subject to search under Section 67 of the CGST Act where unaccounted stock was seized.
Kshitij was arrested during the intervening night between 29th and 30th November, 2024 and imputed with allegations of availing ITC amounting to Rs. 10,76,99,292/- by procuring fake invoices without actual supply of goods through the firms operated by co-accused Shri Ayyub Malik in contravention of Section 132(1)(c), CGST Act.
Petitioner was produced before The Chief Judicial Magistrate (Special Court), Patiala House Court, New Delhi early afternoon on 30th November, 2024 along with a remand application for 14 days judicial custody; the Magistrate disposed of the application granting 13 days judicial custody to the Department.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
Advocates Maninder Singh, Bobby C., Pulkit Verma, Akhil Gupta, Sanjana Nair, Gurjass Singh Puri, Rohit Kheriwal and Nishant Nain, appearing for the Petitioner before the Delhi High Court vehemently contested the procedures adopted by the GST Department while conducting arrest, and condemned the mechanical approach purported by the Magistrate in affirming the judicial custody.
The Respondent Department, represented by Senior Standing Counsel Anurag Ojha, with Dipak Raj, Vipul Kumar, Karan Aggarwal, Shubham Kumar and Deepak Somani claimed that their sole obligation was to ‘inform’ the Petitioner about the grounds which had been effectuated through the Arrest Memo even though the memo had no explicit heading titled “Grounds of Arrest”.
The single-judge Bench of Justice Anish Dayal observed that the petitioner had just been orally informed about the grounds of arrest; the nature scope and expanse of the information had not been documented; no written grounds of arrest had been given during arrest or prior to remand and that the remand application with no “specific grounds of arrest” had been handed over to the petitioner just prior to the hearing before the Magistrate.
Citing the decisions of the Supreme Court in Pankaj Bansal v. Union of India (2024), Prabir Purkayastha v. State, NCT Delhi (2024) and Arvind Kejriwal v. Directorate of Enforcement (2024) the Division Bench observed the development of the jurisprudence of arrest requirements under the Prevention of Money Laundering Act, 2002 (PMLA Act) and Unlawful Activities (Prevention) Act, 1967 (UAPA Act).
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
As per the Constitutional Peg under Article 22(1) of the Constitution of India, any person being detained shall be informed “as soon as may be” of the relevant grounds, and in writing as per the above-mentioned Supreme Court decisions.
Observing that the when the liberty of a person is at stake, the investigation/arresting agency must exercise overcaution, exactitude, and punctiliousness, the Delhi High Court rebuked the observation of the Magistrate order wherein it was merely noticed that the grounds of arrest had been explained to the accused persons and that the Investigating Officers had completed codal requirements and shown justifiable grounds of arrest without sufficient reasoning and application of mind.
In conclusion, Justice Anish Dayal allowed the Petition, holding the arrest to be illegal while ordering the release of the Petitioner from Judicial Custody.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
Additionally, the High Court clarified that the present decision is a judicial review of the arrest and not an opinion of the merits of the GST Authorities case against the Petitioner.
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